A blog by Harry Stein about public policy, with some DC sports thrown in.

Reaching a Budget Deal is Still Important

The Washington Post reports that pressure is dropping to reach a budget deal to cut the deficit, complete with a picture of Paul Ryan having a sad. The pressure to cut the deficit is dropping because the deficit is already being cut. The economy is improving, which means more tax revenue and lower spending on safety net programs. Also, Congress already enacted large tax increases and spending cuts when it passed legislation to raise the debt ceiling in 2011 and avert the “fiscal cliff” at the end of 2012.

While cutting the deficit further is not an urgent priority, reaching a budget deal should be. That’s because a portion of the spending cuts already enacted by Congress is “sequestration,” an across-the-board cut that is causing problems throughout the country. Republicans oppose the cuts to military spending, and Democrats are primarily concerned about the cuts in domestic programs. Neither side likes sequestration. It was included in the debt ceiling package to encourage a future budget deal that would replace the across-the-board cuts.

The spending bills that currently fund the government expire at the end of September, which is also when the debt ceiling is expected to be reached. Congress will need to pass appropriations bills to avoid a government shutdown, and raise the debt ceiling to prevent a default on our bond payments. These two events are the opportunity to reach a budget deal that replaces sequestration, since our government now functions by lurching from crisis to crisis.

The House and Senate face an interesting choice in writing their appropriations bills this year. Do they stay within the low spending caps imposed by sequestration, and decide the best way to allocate the spending cuts? That has the advantage of avoiding the problems of mindless across-the-board cuts. But members would then have to take responsibility for deep cuts to specific programs, and implicitly support a very low overall level of spending. The other option is to write spending bills that exceed the sequestration caps, but support a more robust defense and domestic agenda. This approach counts on a future budget deal that eliminates sequestration, because otherwise those spending bills will be subject to the same across-the-board cut that we are living with this year.

Either way, reaching a budget deal still matters. Domestic programs have been cut past the bone, which means less scientific research, more homelessness, and worse care for elderly cancer patients, among other things. Former Secretary of Defense Leon Panetta has called the sequestration cuts “devastating” to our national security. Even if there is room to cut unnecessary spending in these areas – and there are good things to cut – sequestration is not the way to do it.

When sequestration was created, the thinking was that it would encourage a deal that would reform taxes and entitlements, which would both increase revenue and cut spending. That’s still the best approach. President Obama’s budget endorses a set of policies that would reduce the deficit by $1.8 trillion, more than enough to replace sequestration. Congress should start with that document.